A Peak Into Amazon's Transportation & Logistics Trends

SunTrust Robinson Humphrey’s Robert S. Peck maintained a Neutral rating for Amazon.com, Inc. AMZN, following a call with logistics expert Marc Wulfraat.

Leading supply chain logistics consultant, Marc Wulfraat, is the Founder and President of MWPVL, which tracks Amazon’s domestic and international footprint. Analyst Robert Peck mentioned the key takeaways from the call as:

• Speed, Service and Cost - Amazon aims at increasing cycle time and driving higher levels of service, while driving net shipping and fulfillment costs per unit lower.
• Capex Build-out Shifting Smaller - Spend is likely to moderate for larger footprint FCs and DCs in North America, with more than 86 facilities projected by the end of 2016. Amazon is also likely to continue ramping its coverage of Sort Centers [SCs] and Prime Hubs.
• Replacing, Not Competing - Amazon plans to shift large portions of its volume away from UPS and FedEx and use its own network. “However, it won’t be able to remove all volumes and MWPVL feels they will not seek to compete in the logistics market at the moment,” Peck wrote.
• Going Global - Amazon is building its logistics capabilities in the UK, the US and Germany, having positioned itself with local partners. The company may be able to streamline its global inventory footprint to serve end customers and cross border trade in the future.
• Difficult to Predict Margin Impact – While saying that Amazon may make substantial investments in the early years, the analyst added that it is tough to estimate the net impact to per unit economics and overall margins.
• Kiva Savings Real – The use of Kiva systems in FCs could result in labor savings of 20 percent.